Wednesday, July 26, 2006
HP Acquires Mercury Interactive for $4.5B (AMR)
Hewlett-Packard is acquiring Mercury Interactive—a top vendor of software quality, application management, and portfolio management products—for $52 a share, or approximately $4.5B in cash. The deal is expected to close in the fourth quarter of this year. HP expects that the addition of Mercury will be dilutive to earnings in fiscal 2007 but accretive in 2008.
Friday, July 21, 2006
Oracle as a Service (Line56)
COCC taps Oracle to extend e-business infrastructure and applications to small and medium-sized banks
Outside SAP (Line56)
Understanding why enterprise resource planning may have to be complemented by business process management "from the outside"
Manhattan Associate Posts Strong Quarter. The Pressure Is On. (AMR)
Manhattan Associates (MANH) reported strong 2Q06 results, posting a record $78M in consolidated revenue. Earnings per share rose by 37% to $0.34 year to year. These numbers far exceeded consensus projections of $69M in revenue and 27 cents in earnings per share. Its strong 2Q06 results position it to meet full-year guidance after its 1Q06 miss.
Manhattan and competitor RedPrairie are under intense pressure from the ERP vendors, especially Oracle (ORCL) and SAP (SAP). Buyers for new business have to prove to their executive management why they can’t use the equivalent products from Oracle or SAP, and have to go beyond them. Oracle and SAP are investing in warehouse and overall SCE space, as evidenced by Oracle’s 2005 purchase of G-Log. And because SAP and Oracle are extremely well funded and their customer adoption rates are high, the ramp to parity is faster.
Manhattan and competitor RedPrairie are under intense pressure from the ERP vendors, especially Oracle (ORCL) and SAP (SAP). Buyers for new business have to prove to their executive management why they can’t use the equivalent products from Oracle or SAP, and have to go beyond them. Oracle and SAP are investing in warehouse and overall SCE space, as evidenced by Oracle’s 2005 purchase of G-Log. And because SAP and Oracle are extremely well funded and their customer adoption rates are high, the ramp to parity is faster.
Manhattan Associate Posts Strong Quarter. The Pressure Is On.(AMR)
Manhattan Associates (MANH) reported strong 2Q06 results, posting a record $78M in consolidated revenue. Earnings per share rose by 37% to $0.34 year to year. These numbers far exceeded consensus projections of $69M in revenue and 27 cents in earnings per share. Its strong 2Q06 results position it to meet full-year guidance after its 1Q06 miss.
Manhattan and competitor RedPrairie are under intense pressure from the ERP vendors, especially Oracle (ORCL) and SAP (SAP). Buyers for new business have to prove to their executive management why they can’t use the equivalent products from Oracle or SAP, and have to go beyond them. Oracle and SAP are investing in warehouse and overall SCE space, as evidenced by Oracle’s 2005 purchase of G-Log. And because SAP and Oracle are extremely well funded and their customer adoption rates are high, the ramp to parity is faster.
Manhattan and competitor RedPrairie are under intense pressure from the ERP vendors, especially Oracle (ORCL) and SAP (SAP). Buyers for new business have to prove to their executive management why they can’t use the equivalent products from Oracle or SAP, and have to go beyond them. Oracle and SAP are investing in warehouse and overall SCE space, as evidenced by Oracle’s 2005 purchase of G-Log. And because SAP and Oracle are extremely well funded and their customer adoption rates are high, the ramp to parity is faster.
Thursday, July 20, 2006
Insights From SAP's Earnings Call (AMR)
Last week, Jim Shepherd reviewed SAP’s pre-announcement that its second quarter results would come in slightly below analyst expectations (see the AMR Research Alert article “SAP Warns on License Revenue Growth, Holds Firm on 2006 Outlook”). The company blamed it on lower-than-expected sales in Europe and Asia. Management did its best to dispel rumors that business was slowing by noting that “order entry” and the pipeline remained strong.
Wednesday, July 19, 2006
An SAP Retail Win (Line56)
Company that CIO calls "first full-suite SAP customer in North America for retail" talks to Line56; goals include improving customer experience, simplifying inventory ownership
Monday, July 17, 2006
SAP's quiet achiever makes a big noise (FT)
Henning Kagermann talks softly and talks well. He can deftly translate the forest of acronyms that makes SAP's business of making and selling business software such an impenetrable affair for those who can't tell their CRM from their ERP.
"We are the engine, if you like. You need a strong engine to power everything else," he says, describing new software - ESA (enterprise systems architecture) to those in the know - that allows accounts, inventory or customer management programs made by SAP or its rivals to communicate with each other.
Without fanfare Mr Kagermann has spent the past three years steering the world's biggest business software maker through the wreckage of the technology boom. He pumped money into research, making a push to come up with more user-friendly, web browser-based software.
"Organic growth" has been his clarion call. He believes it will allow him to put more distance between SAP and its arch-rival Oracle, whose market share is still less than half thatof the German company.
With the launch of the new ESA, the software supplier to many of the world's biggest corporations hopes to win new customers in small and medium-sized companies. The target is for sales of €8.5bn (£5.9bn)to double by 2010. This represents a genuine departure.
Instead of striving to offer a computer program for every niche of business life, Mr Kagermann wants to make SAP the platform for other providers.
"There are some important companies that are strong in [sections of] the market - and we want to earn a bit of money with them," he says, pointing to deals with Microsoft (to hook "Office" into SAP software) or IBM (to do the same for databases).
This flow of clear and quiet logic is interrupted if he is asked anything personal. His crisp blue gaze lowers, as if to avoid the embarrassment of any trivial personal revelation.
Mr Kagermann does talk about the fact that he joined the company in 1982 as "something like the 86th employee" and that "everybody played some kind of ball game", in the spirit of the sports-mad founding trio, Hasso Plattner, Klaus Tschira and Dietmar Hopp. But he interrupts the reverie. "I organised a volleyball team, but it didn't last long," he says, before switching back to business: "In sporting terms, I'm not going to leave SAP a great legacy."
Is he looking ahead to life at Europe's largest software company after Henning Kagermann? For months he has refused to say whether he will renew his contract before it runs out next year.
"It's not a question that will affect our success or our strategy," he says. "A decision hasn't been made yet. The time isn't ripe."
Investors might disagree on both counts. Since taking over as sole chief executive of the world's number three software house in 2003, thecerebral Mr Kagermann has more than filled the mantle of his brilliant and sometimes rowdy predecessor, Mr Plattner.
Since Mr Plattner ceded control to his co-chief, Mr Kagermann has increased SAP's share of the market for enterprise resource planning (ERP) programs with more than one function from 35 per cent to 43 per cent, according to AMR Research.
Even though the US group spent about $19bn buying up rivals, Oracle has 19 per cent of the ERP market. In 2003, it and Peoplesoft, now part of Oracle, held 25 per cent.
Double-digit growth in annual sales and profits has become the hallmark of the Kagermann era - and hints of less-than-stellar performance rattle investors. Last week, SAP said sales of software licences grew only 8 per cent in the second quarter as big orders were held up, and its shares dropped 5 per cent. But even quarterly blips cannot hide Mr Kagermann's success.
Operating profit margin rose from 22 per cent in 2002 to almost 28 per cent last year, raising group valuation by half to €70bn. In Germany, only Deutsche Telekom and Eon are worth more.
Of course, Mr Kagermann stresses this isn't only his doing. "We're a team," he says. "That means someone can always take over when someone else goes . . . It gets really dangerous when things . . . get attached too much to one individual."
The former Brunswick University professor of physics appears to place more trust in systems than in personalities. After all, he abandoned that career to become a developer for a company that was committed to banishing the unreliable, human aspect from business.
In SAP Mr Kagermann seems to have found a company in which good organisation is more important than the one leading light. Alluding to his own career, he says it is "statistically proven" that new bosses from within a company do better than those drafted in.
This suggests his choice of successor would, if one were needed, fall on one of his six board colleagues. The wily marketing head Léo Apotheker and the enthusiastic, young development boss Shai Agassi are seen as front-runners.
But Mr Kagermann's love of systems glosses over how important his personality has become to a company that is suffering as much as it is celebrating. German workers have become restive about the pace of jobs growth overseas; union influence has risen.
The majority of the 5,000 people SAP took on last year joined foreign operations. Only 40 per cent of the 34,000 employees are now based in Germany, a quotient that will drop further as more research and development goes to the US or India.
With swept-back grey hair and raked eyebrows, Mr Kagermann carries a hint of the mad professor. But to many German employees, he is a consoling figure - more so than Mr Apotheker, a German based in Paris, or Mr Agassi, an Israeli based in Palo Alto.
That is quite a feat. Mr Plattner had for decades been a gregarious and out-spoken ambassador for the company. He was famous for public spats about strategy with Oracle's founder Larry Ellison and for playing the guitar at SAP's big customer schmoozes.
His chosen successor, by contrast, was the quiet man nobody really knew. Many industry observers wondered whether Mr Kagermann, who started at SAP as a developer for cost-control software, was the right man for a big job in a sector full of big egos.
Mr Kagermann's refusal to join the dotcom personality parade was based on the conviction that actions speak louder than words. "You influence people less by talking to them," he says of running SAP, "than through what you do."
His approach had an effect. Andrew Nelson, founder of Tomorrow Now, a small support firm SAP bought last year, says of Mr Kagermann: "He keeps it simple. He keeps the client in mind. Way too often in this industry, egos and vanity get in the way."
Ironically, the resulting anti-persona has become Mr Kagermann's distinguishing feature. He has spread a quiet confidence that has even helped calm the worst fears of German staff. The public discussion about foreign influence on SAP has died down.
Clients like this assurance - though it can exasperate. Mr Kagermann tells of a visit to a sceptical Japanese executive, who listed his needs to explain why he was not running SAP. Mr Kagermann recalls interrupting: "But we can do that . . . and we can do that . . . and we can do that."
He smiles. "I've only once seen a Japanese person get angry. They're usually such a polite people," he adds with a glimmer of mischief.
No wonder he has been able to rile Oracle executives just as effectively as the more vociferous Mr Plattner once did.
Copyright The Financial Times Limited 2006
"We are the engine, if you like. You need a strong engine to power everything else," he says, describing new software - ESA (enterprise systems architecture) to those in the know - that allows accounts, inventory or customer management programs made by SAP or its rivals to communicate with each other.
Without fanfare Mr Kagermann has spent the past three years steering the world's biggest business software maker through the wreckage of the technology boom. He pumped money into research, making a push to come up with more user-friendly, web browser-based software.
"Organic growth" has been his clarion call. He believes it will allow him to put more distance between SAP and its arch-rival Oracle, whose market share is still less than half thatof the German company.
With the launch of the new ESA, the software supplier to many of the world's biggest corporations hopes to win new customers in small and medium-sized companies. The target is for sales of €8.5bn (£5.9bn)to double by 2010. This represents a genuine departure.
Instead of striving to offer a computer program for every niche of business life, Mr Kagermann wants to make SAP the platform for other providers.
"There are some important companies that are strong in [sections of] the market - and we want to earn a bit of money with them," he says, pointing to deals with Microsoft (to hook "Office" into SAP software) or IBM (to do the same for databases).
This flow of clear and quiet logic is interrupted if he is asked anything personal. His crisp blue gaze lowers, as if to avoid the embarrassment of any trivial personal revelation.
Mr Kagermann does talk about the fact that he joined the company in 1982 as "something like the 86th employee" and that "everybody played some kind of ball game", in the spirit of the sports-mad founding trio, Hasso Plattner, Klaus Tschira and Dietmar Hopp. But he interrupts the reverie. "I organised a volleyball team, but it didn't last long," he says, before switching back to business: "In sporting terms, I'm not going to leave SAP a great legacy."
Is he looking ahead to life at Europe's largest software company after Henning Kagermann? For months he has refused to say whether he will renew his contract before it runs out next year.
"It's not a question that will affect our success or our strategy," he says. "A decision hasn't been made yet. The time isn't ripe."
Investors might disagree on both counts. Since taking over as sole chief executive of the world's number three software house in 2003, thecerebral Mr Kagermann has more than filled the mantle of his brilliant and sometimes rowdy predecessor, Mr Plattner.
Since Mr Plattner ceded control to his co-chief, Mr Kagermann has increased SAP's share of the market for enterprise resource planning (ERP) programs with more than one function from 35 per cent to 43 per cent, according to AMR Research.
Even though the US group spent about $19bn buying up rivals, Oracle has 19 per cent of the ERP market. In 2003, it and Peoplesoft, now part of Oracle, held 25 per cent.
Double-digit growth in annual sales and profits has become the hallmark of the Kagermann era - and hints of less-than-stellar performance rattle investors. Last week, SAP said sales of software licences grew only 8 per cent in the second quarter as big orders were held up, and its shares dropped 5 per cent. But even quarterly blips cannot hide Mr Kagermann's success.
Operating profit margin rose from 22 per cent in 2002 to almost 28 per cent last year, raising group valuation by half to €70bn. In Germany, only Deutsche Telekom and Eon are worth more.
Of course, Mr Kagermann stresses this isn't only his doing. "We're a team," he says. "That means someone can always take over when someone else goes . . . It gets really dangerous when things . . . get attached too much to one individual."
The former Brunswick University professor of physics appears to place more trust in systems than in personalities. After all, he abandoned that career to become a developer for a company that was committed to banishing the unreliable, human aspect from business.
In SAP Mr Kagermann seems to have found a company in which good organisation is more important than the one leading light. Alluding to his own career, he says it is "statistically proven" that new bosses from within a company do better than those drafted in.
This suggests his choice of successor would, if one were needed, fall on one of his six board colleagues. The wily marketing head Léo Apotheker and the enthusiastic, young development boss Shai Agassi are seen as front-runners.
But Mr Kagermann's love of systems glosses over how important his personality has become to a company that is suffering as much as it is celebrating. German workers have become restive about the pace of jobs growth overseas; union influence has risen.
The majority of the 5,000 people SAP took on last year joined foreign operations. Only 40 per cent of the 34,000 employees are now based in Germany, a quotient that will drop further as more research and development goes to the US or India.
With swept-back grey hair and raked eyebrows, Mr Kagermann carries a hint of the mad professor. But to many German employees, he is a consoling figure - more so than Mr Apotheker, a German based in Paris, or Mr Agassi, an Israeli based in Palo Alto.
That is quite a feat. Mr Plattner had for decades been a gregarious and out-spoken ambassador for the company. He was famous for public spats about strategy with Oracle's founder Larry Ellison and for playing the guitar at SAP's big customer schmoozes.
His chosen successor, by contrast, was the quiet man nobody really knew. Many industry observers wondered whether Mr Kagermann, who started at SAP as a developer for cost-control software, was the right man for a big job in a sector full of big egos.
Mr Kagermann's refusal to join the dotcom personality parade was based on the conviction that actions speak louder than words. "You influence people less by talking to them," he says of running SAP, "than through what you do."
His approach had an effect. Andrew Nelson, founder of Tomorrow Now, a small support firm SAP bought last year, says of Mr Kagermann: "He keeps it simple. He keeps the client in mind. Way too often in this industry, egos and vanity get in the way."
Ironically, the resulting anti-persona has become Mr Kagermann's distinguishing feature. He has spread a quiet confidence that has even helped calm the worst fears of German staff. The public discussion about foreign influence on SAP has died down.
Clients like this assurance - though it can exasperate. Mr Kagermann tells of a visit to a sceptical Japanese executive, who listed his needs to explain why he was not running SAP. Mr Kagermann recalls interrupting: "But we can do that . . . and we can do that . . . and we can do that."
He smiles. "I've only once seen a Japanese person get angry. They're usually such a polite people," he adds with a glimmer of mischief.
No wonder he has been able to rile Oracle executives just as effectively as the more vociferous Mr Plattner once did.
Copyright The Financial Times Limited 2006
Friday, July 14, 2006
SAP Warns on License Revenue Growth, Holds Firm on 2006 Outlook (AMR)
SAP stock took a hit this week when the German software giant warned of a lower-than-expected outlook for 2Q06 license revenue growth, reflecting weakness in the Asia-Pacific region.
SAP said that quarterly license revenue likely grew by 8% to Euro 621M. Consensus estimates were for license revenue growth of 17% to Euro 675M. Overall, revenue likely increased by 9% to Euro 2.2B, according to SAP management. The consensus estimate for 2Q06 revenue is Euro 2.29B, according to Thomson Financial. Pro forma net income should jump by 38% to Euro 432M (Euro 1.41 per share).
But SAP held firm on its 2006 outlook. The company stated that it continues to expect 15% to 17% license revenue growth this year. It also reiterated its previous earnings forecast.
Here’s a rundown of the news and what it means:
SAP said that quarterly license revenue likely grew by 8% to Euro 621M. Consensus estimates were for license revenue growth of 17% to Euro 675M. Overall, revenue likely increased by 9% to Euro 2.2B, according to SAP management. The consensus estimate for 2Q06 revenue is Euro 2.29B, according to Thomson Financial. Pro forma net income should jump by 38% to Euro 432M (Euro 1.41 per share).
But SAP held firm on its 2006 outlook. The company stated that it continues to expect 15% to 17% license revenue growth this year. It also reiterated its previous earnings forecast.
Here’s a rundown of the news and what it means:
- Likely cause behind this shortfall?—SAP’s 2Q06 software sales likely rose by 16% to Euro 201M in the United States, while its core EMEA market likely stepped up by just 3% to Euro 296M. Management didn’t explain what was behind the now-flat license revenue expectation in the usually robust Asia-Pacific region.
- Outlook on the pipeline—“Our order entry is strong, and we continue to see a robust pipeline,” said CEO Henning Kagermann. In our view, SAP has a very strong pipeline of potential business, and nothing has occurred to diminish its competitiveness—it is simply feeling the effects of market nervousness.
While demand for enterprise applications remains very strong and SAP continues to execute well, we are once again seeing buyers extending the close cycles because of concerns about the economy and geopolitical instability. We have not seen evidence of budgets being reduced or projects being cancelled, but there is an additional level of caution that has caused deals to slip out and sales cycles to slow down.
Thursday, July 13, 2006
SAP tumbles on weak licence growth (FT)
SAP, the world’s largest business software group, worried investors on Thursday as it warned that growth in sales of new software licences were well below market expectations for the second quarter.
Wednesday, July 12, 2006
The Supply Chain "Mini-Maestro" (Line56)
Fascinating MIT Sloan paper discusses evolving role of supply networks
Tuesday, July 11, 2006
Saturday, July 01, 2006
IBM PLM Relational Product Developement (RPD) (IBM)
IBM PLM Relational Product Developement (RPD)
A PLM methodology to optimise the business value
of relational design
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